Diocese general manager Stuart Young said the site, which included three buildings and a car park on the corner of York Pl and Tennyson St, had been purchased mainly to give the school and its pupils some breathing space.
"There are 900 pupils on a very small parcel of land.
"Because Kavanagh is on a constrained site with limited outdoor space, we would like to use the new area to create some open space.
"That may mean demolition of some of the buildings," Mr Young said.
The purchase would also allow the college to provide for the future, he said.
"If the Post Primary Teachers' Association manages to negotiate smaller class sizes with the Ministry of Education, the school will need more classroom space than it has available at present," Mr Young said.
One of the buildings would remain untouched because an application had been made by the Historic Places Trust in Dunedin to make it a category 2 historic building, he said.
The building was believed to be of historic importance because it was where prominent New Zealand artist Colin McCahon was trained.
Despite the application, Mr Young said it would not hinder the school's expansion.
"We will use the building as it is, and the administration department will be housed there - hopefully from next year."
It was also hoped the college could work closely with the Dunedin City Council to create a new entrance to the school on Tennyson St where traffic could pick up and drop off pupils with ease to avoid congestion on Rattray St, he said.
"We would like to create a turning bay on Tennyson St to take school traffic away from Rattray St.
"Traffic almost comes to a stop on Rattray St before and after school at the moment. It's quite dangerous."
Land close to the school did not come up for sale very often, and Mr Young said the diocese had "rejigged" its finances to take advantage of the opportunity.
The purchase agreement was expected to be made final early next month and the college would take possession on December 20.
Mr Young said the announcement of the closure, and probable sale, of St Patrick's School in South Dunedin earlier this week would help to finance the Tennyson St purchase.
However, the two incidents were not connected, and it was just fortuitous they occurred at the same time, he said.
Otago Polytechnic chief operations officer Philip Cullen said although the land and buildings were owned by the Ministry of Education, they were listed and valued on the polytechnic's balance sheet at about $1.8 million.
Only half of the land and buildings would be sold to the college.
The other half was already owned by the Ministry of Education for use by Otago Girls' High School, he said.
